Foresight Ventures: Tear Down the “Walled Garden”, A paradigm shift in Web3 Social Network

A paradigm shift in Web3 Social Networks

1.1 Social Graph: Giving Back Ownership to users

  • In Web3, our social graph will no longer be monopolized by any company and will be stored entirely on-chain.
  • However, social graph data is not easy to obtain.

1.2 Identity: Traceable and Pluggable Dencentralized Identity

  • With such DID, new projects can easily target potential high-value contributors for airdrops.
  • For social Dapps, DID can natively help establish social relationships. For example, NFT groups can only be joined by Punks or BAYC holders.

1.3 Privacy: Information Authorization, Privacy Computing, and Private Transactions

  • In the application layer, there are two approaches: multiple accounts and information authorization. Firstly, different wallets can have different identities so switching to another identity could be as simple as double-clicking your mouse. Secondly, since a DID corresponds to multiple addresses, multiple accounts may not work as intended. In this case, users should be able to configure their privacy settings in social graph or DID protocol to determine which part of the information can be read publicly and which part needs to be encrypted.
  • In the computation layer, privacy-preserving computing protocols can be introduced so that data can be safely circulated in an “available but invisible” way. At present, the main privacy technologies include Zero-knowledge proof, Multi-Party Computation, Trusted Execution Environment (TEE), etc.
  • At the data storage layer, privacy concerns become more complicated. Because the immutable and open nature of blockchain contradicts privacy. Once data is uploaded to the chain it will be visible to all, and encrypting all transactions is obviously very expensive and time-consuming. So the mid-way solution is likely to be allowing the user to choose in advance, which part of the data needs to be encrypted in the first place(e.g. StarkWare’s Volition) and stores this part of data directly off-chain.

1.4 Composability: Composability is to software what compounding is to finance

  1. Protocol composability: this refers to the ability to “take assets or data generated by one protocol to build on top of other protocols.” Such a combination makes one product the starting point of the next round of innovation. For example, a combination of a lending protocol and a social protocol leads to a”social credit” project.
  2. Data composability: New product no longer needs to accumulate user data from scratch. The decentralized database(e.g. Ceramic) stores the user’s identity, social graph, and chat history in a unified data model that allows for easy access and native interoperability in Dapps.
  3. Identity composability: Unlike Web2 where identities are isolated and stored on a centralized server, Web3 DID can be read and authorized access to all Dapps, ensuring composability of user identities on-chain.
  4. Detachability: Users should have the right to authorize access to certain Dapps and share only the part of the information they are comfortable sharing. Such authorizations can be canceled at any time to prevent personal data from being abused.

1.5 Tokenization: come for profit, stay for the network

  • Fan Token: Rally allows creators to issue fan tokens. As the creator gets more popular, the value of the fan token also rises, and creators and token holders all profit from this.
  • Tokenization of artworks: Mirror helps authors mint an article into NFT and start crowdfunding. Whenever these NFTs are sold, a certain percentage of the sale fee is returned to the NFT holders, who can exchange a certain percentage of ETH in the pool.
  • Tokenization of social relations: Lens Protocol mint users’ likes/follows/comments into NFTs, and these NFTs will increase in value in relation to the popularity of the creator & the post; And based on such a relationship, it naturally provides good soil for the community. Atem Network is connecting the community through NFT, and users can discuss, trade, and govern the NFT-based community.
(Mirror Funding Page)
  • The vast majority of creators only have a few fans and get few rewards. Most of the rewards or NFT crowdfunding have flowed to the top projects, and most money flows to those who don’t need it.
  • The gas fee for NFT minting is too high. The income for average creators or users barely covers the gas fee. The solution for NFT-based projects in the future is likely to be moving to L2 to reduce costs.

2. Web3 Social Network Landscape

2.1 Data layer

  • Ceramic stores data in streams which allows for real-time modification.
  • Ceramic provides a powerful built-in DID and IDX cross-chain identity protocol. At present, several social projects have been developed on top of Ceramic, such as the social graph CyberConnect, the Web3 Twitter Orbis, the IM platform The Convo Space, and so on.

2.2 Protocol layer

  1. No matter which social Dapp the user uses, they all need a social graph and DID.
  2. In the long run, the protocol layer will have a strong network effect.
  3. Both the social graph and the DID are in the early stages of development. On the one hand, the industry has not yet formed a unified standard. On the other hand, users have little understanding of these concepts. The industry landscape is still unclear, bringing a lot of investment opportunities.

2.2.1 Social Graph

  • CyberConnect aims to be the standard data layer for developers to access, aggregating on-chain and off-chain data. Developers can interact with social graphs through API calls.
  • CyberConnect is a lightweight and pluggable social graph, and it now has 1.4 million+ registered users, and 70+ projects have achieved API access.
  • However, CyberConnect only provides limited functions other than indexing data. Meanwhile, the cost-free nature of the project may generate a large amount of redundant data in the access, resulting in a decrease in the quality of the social graph.
  • By transforming social relations into NFTs, Lens encourages users to generate more Web3 native social relations; at the same time, it builds its own protocol standards.
  • Advantages of Lens:
  • Limitation of Lens:
  1. User experience. It is based on the polygon smart contract. Every interaction needs the user to prove. Such experience is not smooth enough for social product.
  • Backed by the Aave team, Lens Protocol tries to build its own ecosystem. Overall, its ecosystem is developing pretty fast. In the recent hackathon, 10 projects were shortlisted for winners, including Phaver(Share-to-earn Dapp), Lenster (Decentralized BBS Forum), Clipto (Video creation platform) etc.

2.2.2 Decentralized Identity DID

2.3 Privacy layer

  • The use-case of private computing networks is relatively limited, as they are currently rarely adopted by projects, thus, technologies are still immature.
  • The outbreak of social networking demand may win more users, but the investment priority for privacy may not be as high as in other layers. Because a user may only have a small amount of data that needs to be encrypted, it also needs to meet the three preconditions: increase in social demand+ increased awareness of user for privacy + consumer’s willingness to pay for private services.

2.4 Application Layer

  • Social media applications are likely to onboard more people from web2.
  • At present, there is still no killer Dapp in this layer. The main problem is many Web3 social Dapps only have rewards and lack consumption for tokens. It is difficult for their tokens to circulate in the economy, causing high selling pressure.
  • We believe that there will be some novel business models in the future, such as:
  1. NFT-based social applications. Only verified NFT holders can join to communicate with each other, and users with high credit ratings can directly contact NFT buyers. That’s where p2p transactions, swaps, and NFT lending could possibly happen. A good example is Atem Network, which forms a community through NFT, and users can discuss trade, and jointly govern the community.
  1. Web3 social network is still in its early days, and the competitive landscape is not yet clear; Emerging business models such as NFT-based social relations and fan economy deserve long-term attention.
  2. Application layer: pay attention to social Dapps with profit-sharing functionalities, such as mirror. The key is whether the token comic is reasonable enough to retain users and high-value creators.
  3. Protocol layer: pay attention to the protocols and data networks that can attract users to generate new relationships, identities, and certificates. Such products are the infrastructure on the one hand and are also able to accumulate a large user base on the other.
  4. Social network exploration based on SoulBound Tokens: The main solution of today’s social protocol is still around NFT or off-chain database. The former may have too strong financial properties, while the latter may be less composable because it is not on the chain; social relationships formed based on SoulBound Tokens may be possible to take into account the composability and weak financial attributes, and the core value of the social token on the chain can be returned to the relationship to prove itself, and then become a truly effective social credential.

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Foresight Ventures is a blockchain technology-focused investment firm, focusing on identifying disruptive innovation opportunities that will change the industry

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Foresight Ventures

Foresight Ventures

Foresight Ventures is a blockchain technology-focused investment firm, focusing on identifying disruptive innovation opportunities that will change the industry

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